Asian companies' share sales may reach record $291b

Tokyo: Asian companies outside of Japan may raise another $116 billion (Dh425 billion) in share sales by the end of the year, boosting the total for 2010 to a record $291 billion, Citigroup Inc. said.

The equity issuance this year will be about 1.9 per cent of total money supply available, higher than the average of 1.6 per cent since the early 1990s, Citigroup strategists led by Markus Rosgen wrote in a report yesterday. The sales will represent a "clearly unsustainable" 12.4 per cent of the MSCI AC Asia excluding Japan Index's market capitalisation, they wrote.

"With cash levels just at averages, investors may have to sell something in order to buy something," according to the report. "Best to avoid the markets and sectors which are well-owned as these could be a source of funds."

Equity offerings

Agricultural Bank of China Ltd., the nation's largest lender by customers, raised $22.1 billion in a July initial public offering, the world's largest ever. Other Chinese lenders including Bank of China Ltd. also raised funds from rights issues, while elsewhere in Asia, companies including State Bank of India have announced plans for equity offerings.

China and Hong Kong may have $33 billion of share sales for the rest of the year, followed by India with $12 billion and Singapore at $9.1 billion, according to estimates by Citigroup. Share sales in Taiwan, Thailand and the Philippines will probably be the lightest.

China and Taiwan are already "consensus underweight" markets, with investors holding more of Hong Kong and Indonesia, Rosgen said.

Among industries, diversified financials, materials and consumer stocks are the most "vulnerable" as investors sell existing holdings to fund new purchases, according to the report. Even given this year's share sales, the MSCI Asian index has gained 6.7 per cent this year, following a 68 per cent rally in 2009.

"There is little relationship between markets and issuance; they are coincident at best," Rosgen wrote.

Initial sales high

Ronald Arculli, chairman of Hong Kong Exchanges & Clearing Ltd., said as many as 90 companies are seeking to offer shares in initial public offerings.

"So far we've been quite fortunate this year, it's been quite robust," Arculli said in an interview with Bloomberg Television. "For the second half we have something like 80, 90 queuing up for processing."

Initial sales in Hong Kong have raised HK$145.7 billion ($68.9 billion) this year, with 38 new stocks listed, according to Bloomberg data. From January 1 to September 20 last year, there were 23 IPOs raising HK$58 billion. The volume of initial sales in Hong Kong this year is the second highest of the past decade after 2007, when 47 deals raised HK$147 billion from January 1 to September 20, according to Bloomberg data.